Sign on the Dot-Com Line

Support's bubbling up for landmark pieces of Net legislation

When the Web was young, cyberspace was dominated by academia and personal home pages were dedicated to pressing topics like spelunking and Pez dispensers, the online community’s response to proposals of governmental regulation was a consistent and resounding “hands off.”

But things have changed.

The Net is now a vibrant commercial medium, generating billions in annual revenue and transforming industries ranging from telecom to coal mining.

And one of the most important changes has been in the sentiment toward regulation. Netizens are still dedicated to maintaining the Web’s status as the most free and open communication medium in history, but a new constituency of online entrepreneurs want to make equally certain that the Internet is a safe and friendly place to engage in some serious commerce.

To that end, support has been building over the last couple of years for several landmark pieces of legislation that would grease the wheels of e-commerce and make consumers more comfortable with the idea of parting with their hard-earned cash in a virtual milieu.

One of the highest-profile bills to have wound its way through the halls of justice is the Electronic Signatures in Global and National Commerce Act. The Act was the most successful of many similar measures introduced in the legislature over the past year and a half, all of which set out to figure out a way to assign the same force of law to an online signature that applies to its pen-and-ink equivalent.

With the law in place, Web surfers can apply for a mortgage or car loan directly on the Net, and receive a response without having to physically deal with a bank or wind their way through ribbons of paperwork.

But the consumer side may not be the biggest piece of the puzzle, says Larry M. Zenger, head of the information technology and e-commerce group at Chicago law firm McBride, Baker & Coles. Since the vast majority of consumer transactions over the Web are small (books, CDs, Elvis figurines), Netizens generally require only a credit card to buy the merchandise they want.

The implications get really profound when dealing with business-to-business transactions, Zenger explains. Because large businesses often deal with legally binding contracts several times a day, physically signing and delivering the paper documents involves a substantial amount of time and resources.

However, now that corporate officials can theoretically go through the entire signatory process without leaving their desks, companies should be able to streamline their administrative operations substantially.

“B-to-B will be the hot sector for (e-signatures) because they just do a mammoth amount of volume,” Zenger says.

Political support for the e-signature efforts has been fairly broad-based in Congress, lawmakers on either side of the aisle recognizing the benefits of cutting down on superfluous paperwork. In fact, the only major hurdle to the successful implementation of e-sigs is technology.

There are 20 different companies that want to be the default provider of e-signature technologies, and a roughly a half-dozen competing technological standards for implementing the digital John Hancock — none of which, of course, is compatible with the others.

“That means that what you have here is a reticence on the part of damn near anybody to adopt any of these standards” until a clear leader has been hashed out.

Still, the e-signature measure has gotten a whole lot farther than some of the other major Internet legislation that’s been brought to the table over the past year. Taxation on the Net, which was addressed in several bills introduced in 1999, has proved one of the more contentious legislative issues that Congress has dealt with all year.

The current state of taxation on e-commerce is pretty simple to explain: there isn’t any, at least at the Federal level. Thanks to a bipartisan bill called the Internet Tax Freedom Act, passed in 1998, the Net is immune to Federal taxation until October. After that, it gets a little hazy. A number of bills introduced since have proposed that Internet taxes should be eradicated permanently, but that concept has proved too radical to gain traction in the legislature.

A slightly less controversial permutation, the Internet Non-Discrimination Act, has had a bit more success. The act would extend the ban only for another five years, allowing time to evaluate its effects on e-commerce in 2006. It passed the House of Representatives 352-75, but was sent to a commission for more vetting shortly thereafter, and has not been heard aboutsince.

The main argument fielded by opponents of a moratorium extension is that e-commerce, regardless of how “virtual” it appears on the Web, still uses resources on the ground. Amazon.com may sell its books in cyberspace, but the trucks that deliver them use real highways that have to be maintained.

But attorney Zenger argues that it’s more important, at least for the moment, to ensure that the nascent e-commerce industries can get up on their feet before government tries to extract its due.

The argument isn’t likely to be settled either way this year, as the 2000 legislative session is hitting its twilight. Prior to the November elections, many pols took a pro-commerce, pro-ban stance to appeal to voters. Once the considerable electoral dust has cleared, however, Zenger thinks pols will reveal their true colors.

“Nobody likes to be in favor of taxes when they’re out campaigning,” he says. “Once they’re in office, we’ll see what’s what.”